...Duron 10/21/13 IFRS Rough Draft Ch.20 IFRS vs. GAAP When accounting for pensions and post-retirement benefits, IFRS and GAAP have similarities as well as differences. There are two pension plans that are frequently used in accounting for pensions. These two plans are known as, defined contribution plan and defined benefit plan. Both GAAP and IFRS separate their pension plans, but their accounting for defined benefit plans differ. Another major difference occurs when recognizing actuarial gains and losses. Differences between IFRS and GAAP arise when distinguishing unrecognized past service cost. IFRS and GAAP also have their similarities. They both have similar views when it comes to their view of pensions and postretirement benefits. Both IFRS and GAAP also use the corridor approach when recognizing gains and losses. The defined contribution plan relies on an employer who contributes an amount on certain periods to a pension trust, while the defined benefit plan summarizes the benefits that employees will receive when they retire. There are similarities and differences concerning defined benefit plans. Both IFRS and GAAP recognize liabilities and costs for employee benefits during the period when the service is provided. It’s important to understand that GAAP refers to the defined benefit obligation as the (APBO), while IFRS states it as the (PVDBO). The differences start occurring when recognizing net funded status. Under U.S. GAAP, the status is considered...
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...list of them are as follows: * A new standard were introduce such as IFRS 6 Exploration for and Evaluation of Mineral Resources. * five Interpretations-IFRICs 1-5 * Amendments were made related to IAS 19 Employee Benefits, IAS 39 Financial Instruments: Recognition and Measurement and SIC-12 Consolidation-Special Purpose Entities * Amendments were made for other IFRSs resulting from those pronouncements together with editorial corrections. http://www.ifrs.org/Archive/Press-Relases-Archive/2005/Pages/IASB-publishes-complete-standards-for-2005.aspx Chapter 4 Exercise 1 The cost of inventory in the current year is calculated as: Cost of materialsLess: Abnormal WasteAdd: cost of direct laborAdd: Allocation of Variable overhead costsAdd: Allocation of fixed overhead ( based on normal production levels)Cost of Inventory | $100,000$(10,000)$60,000$30,000$2,5000------------------------------------------------- 2,05,000 | Answer: B $2,05,000 Exercise 4 | Cost | Useful LifeYears | | Depreciation | Motor | $20,000 | 5 | $20,000/5 | $4,000 | Inspection | $10,000 | 4 | $10,000/4 | 2,500 | Machine | $70,000 | 20 | $70,000/20 | 3,500 | Total | $1,00,000 | | | $10,000 | The Depreciation Expenses for Year 1 is $10,000 Ans: D $10,000 Chapter 5 Case 5-1 S.A. Harrington Co. Reconciliation from U.S GAAP to IFRS | 2011 | Income as per U.S GAAP | $5,000,000 | Adjustments: | | Less: Restructuring...
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...Inventories IFRS and GAAP adopts different rules Inventory for using lower of the market method. Under GAAP, an entity should first pick the medium number amongst market ceiling (net realizable value, market floor (net realizable value minus normal profit), and replacement cost. Then compare that medium number with the cost of the inventory. Under IFRS, one only needs to compare the market ceiling value with the cost of inventory. According to the 2013, AT&T includes its inventory in “other current assets” on the balance sheet, which are valued at the lower of cost or market. Telecom Italia lists its inventory as a line item under current assets. It also adopts lower of the cost or market to evaluate its inventories. It is a one-step test by simply comparing the market ceiling value and the cost of inventory. Telecom Italia wrote down by 4 million based on the adjustment to estimated realizable value of its fixed asset. Leases The guidance for distinguish operating and financial leases are similar under IFRS & GAAP. GAAP has a more detailed guidance for capital lease. They have dissimilarities for rules over sale-lease back. Telecom Italia should refer to IAS 17 for its lease reporting, while AT&T should refer to ASC 840 for its financial reporting. Capital lease is “finance lease” under IFRS. Compared to Telecom Italia, the capital lease of AT&T is not significant because of the strict rule for a lessor to claim a capital asset under GAAP. The accounting...
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...|FRAMEWORK | | |U.S. GAAP |IFRS |Similarities | |Purpose of Framework |The FASB framework resides lower in hierarchy. |Management is explicitly required to |Both the frameworks are similar in | | |Management is not required to prioritize it if no|prioritize the IASB framework if there is |their purpose to assist in developing| | |standard is available. |no standard or interpretation available. |and assisting standards. | |Objectives of |It provides different objectives for business |It gives one objective for different |Both frameworks have a broad focus to| |financial statement |entities versus non business entities. |business entities. |provide relevant information to a | | | | |wide range of users. | |Underlying assumptions|Although it recognizes, but not given much |Give importance to accrual and going | | | |prominence is given to accrual and going concern |concern basis...
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...begun the process to migrate from General Accepted Accounting Principles (GAAP) to the International Financial Reporting Standard (IFRS). This migration has advocates for and against the change. A major change in the IFRS proposal is the accounting of leases. One noticeable aspect of the proposals involves classifying operating leases as assets. The proposed rule would, from the lessee perspective, consider all long term leases as assets and not as operating expenses.1 The tax implications of this change would be significant, long term operating leases are currently considered expenses. Since these leases are treated as current expenses and reduce income, they are not currently taxed. A financed lease, also known in the U.S. as a capital lease, is considered an asset and therefore flows to the income statement. A financed lease increases income and is therefore paid with post tax revenue and subsequently depreciated. 3 The current IFRS proposal would classify operating leases as expenses only if those leases are 12 months or less. This change would reclassify most leases under GAAP from operating leases to finance or capital leases under IFRS. These proposed changes could have wide ranging affects on real estate, automobile, aircraft, and medical and industrial equipment leasing.2 Adopting this change would simplify accounting for multinational corporations, since most of Europe has adopted IFRS. However, the ultimate effects could be extremely negative for investment...
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...International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") rather than generally accepted accounting principles in the United States ("U.S. GAAP"). IFRS is a set of principles-based accounting standards published by the London-based IASB. The SEC has encouraged the development of IFRS as a uniform accounting framework to facilitate cross-border offerings. It has also encouraged the convergence of U.S. GAAP and IFRS standards. Since 2002, the Financial Accounting Standards Board ("FASB") has been working with the IASB to harmonize U.S. GAAP and IFRS with the goal of producing a single, high-quality set of accounting standards. Despite the movement toward convergence, differences between U.S. GAAP and IFRS remain. Key areas of divergence include accounting for pension liability, taxes, financial instruments, and business combinations. In addition, IFRS and U.S. GAAP are fundamentally different in that U.S. GAAP standards are primarily rules-based, whereas IFRS standards are primarily principles-based. Rules-based standards typically offer more detailed application guidance. Principles-based standards require management to exercise more judgment in determining how to account for transactions. As a result, IFRS reporting demands more significant time and input from management. IFRS has quickly become the lingua franca of accounting. More than 100 countries now permit or require IFRS reporting. Since 2005, all companies incorporated...
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...IFRS The Changeover A Guide for Users of Financial Reports A Canadian Performance Reporting Board Publication IFRS The Changeover A Guide for Users of Financial Reports A Canadian Performance Reporting Board Publication The IFRS Changeover — A Guide for Users of Financial Reports Copyright © 2010 The Canadian Institute of Chartered Accountants 277 Wellington Street West Toronto ON M5V 3H2 www.cica.ca ISBN 978-1-55385-512-5 Printed in Canada Disponible en français July 2010 i PREFACE This guide is published by the Canadian Performance Reporting Board (CPRB) of the Canadian Institute of Chartered Accountants. Its purpose is to provide a perspective for users of external financial reports on matters arising from Canada’s imminent change in accounting standards for public companies. Members of audit committees and preparers may also find this guide a useful reference. For fiscal years commencing in 2011 and thereafter, Canadian GAAP for most public companies will transition to International Financial Reporting Standards (IFRSs). These global accounting standards should improve international financial reporting comparability in an increasingly global business environment. The conversion to IFRSs will potentially result in a myriad of changes in an entity’s financial statements, and, therefore, its performance metrics. In some cases these changes will have no material consequences. In others, however, the changeover will have a material impact...
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...There are many similarities between IFRS and pre-IFRS Canadian GAAP, however there are also significant differences. They are both similar in terms of style and the form of the individual standards because they are based on similar conceptual frameworks. The main objective of both IFRS and pre-IFRS Canadian GAAP is for financial statements to give a fair presentation. When there is a choice of accounting policies, the one that can reflect the most accurate economic portrait should be selected. Since Extract Tar Sands it traded publicly, included in its stakeholders are international investors. It’s compliance with IFRS is necessary to be a global competitor. IFRS will allow easier financial performance benchmarking amongst competing companies. This in turn will provide better access to capital. With the adoption of IFRS it will also eliminate Extract’s need to reconcile information reported under different national standards while providing consistent information for decision making purposes. The two areas with IFRS that represent the greatest change for Extract tar sands are: 1. Impairment: With IFRS impairments are usually triggered more frequently and unlike pre-IFRS Canadian GAAP, impairments under IFRS can be reversed. 2. Revaluations: Some IFRS including Property, Plant and Equipment, Investment Property and Intangibles allow the revaluation of assets under certain circumstances. This is quite a change from pre-IFRS Canadian GAAP which has no such provision. We...
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...CHAPTER 20 ACCOUNTING FOR PENSIONS AND POSTRETIREMENT BENEFITS IFRS questions are available at the end of this chapter. TRUE-FALSE—Conceptual Answer F T F T T F F T F T F F T F T F T F F T No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. Description Funded pension plan. Qualified pension plans. Defined-contribution plan liability. Defined-benefit plans. Vested benefit obligation. Accumulated benefit obligation. Definition of service cost. Definition of interest cost. Recognizing accumulated benefit obligation. Pension Asset /Liability balance. Plan amendment and projected benefit obligation increase. Years-of-service amortization method. Expected return and actual return. Unexpected gains and losses. Accumulated OCI (G/L) account and the corridor. Amortization of net gains and losses. Recording prior service cost. Reporting accumulated OCI (PSC) on the balance sheet. Other comprehensive income (PSC) and net income. Reconciliation of PBO and fair value of plan assets. MULTIPLE CHOICE—Conceptual Answer d c d c b b a c a a d d d a c b No. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. Description Factors considered by actuaries. Process of funding a pension plan. Accounting problems in pension plans. Nature of a defined-contribution plan. Nature of a defined-benefit plan. Defined-contribution plan characteristics. Accounting for a defined-benefit plan. Pension obligation measurement using future salaries. Definition...
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...that have legal authority to enforce compliance with financial reporting standards. Difference Between GAAP & IFRS GAAP (FASB) | IFRS (IASB) | Under U.S GAAP firms can choose to report comprehensive income in the statement of shareholder’s equity. | Under IFRS the income statement can be combined with “other comprehensive income” & presented as a single statement of comprehensive income. Alternatively presented separately. | CHAP – 24 GAAP (FASB) | IFRS (IASB) | FASB framework includes revenue, expenses, gains, losses and comprehensive income. | IASB framework lists income and expenses as elements related to performance. | FASB defines an asset as a future economic benefit. It also uses word probable in its definition of assets and liabilities. | IASB defines it as a resource from economic benefit is expected to flow. | FASB does not allow the upward valuation of most assets. | ------------- | U.S GAAP has traditionally been more rules-based, but the common conceptual framework is moving towards an objective-oriented approach. | IFRS is largely a principles-based approach. | Companies must disclose their accounting policies and estimates in the footnotes and Management’s Discussion Analysis. | Companies must disclose their accounting policies and estimates in the footnotes and Management’s Discussion Analysis. | CHAP – 25 GAAP (FASB) | IFRS (IASB) | When the outcome of a long term contract can b reliably estimated, percentage-of –completion...
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...IFRS and US GAAP: similarities and differences IFRS readiness series October 2012 Table of contents The heart of the matter 2 US financial reporting will change significantly within the next several years An in-depth discussion 4 Examining the implications IFRS affects US businesses in multiple ways What this means for your business 6 Anticipate and manage the change What companies can and should do now October 2012 The heart of the matter US financial reporting will continue to change over the next several years Although US companies will not when, and how IFRS might be be permitted to use International incorporated into the US financial Financial Reporting Standards (IFRS) reporting system. for US public filings in the foreseeable • In May 2011, the SEC’s Office of future, IFRS has been affecting US the Chief Accountant published a companies for some time, primarily Staff Paper exploring one possible through engaging in cross-border method to incorporate IFRS merger-and-acquisition (M&A) into the US financial reporting activity, meeting the reporting needs system, involving an active of non-US stakeholders, and assisting Financial Accounting Standards with or monitoring of the IFRS Board (FASB) incorporating IFRS requirements of non-US subsidiaries. into US GAAP over an extended US companies are also becoming period of time (the “endorsement” increasingly aware of IFRS, as key method). Under this method, the aspects of US generally...
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...BRITISH AIRWAYS C1. BA has an account entitled “sales in advance of carriage.” Explain the purpose of that account. Would transactions of this type be handled similarly under U.S. GAAP? What is the amount of “sales in advance of carriage,” as of December 31? How did the amount change from the prior year? Would transactions of this type be handled similarly under U.S. GAAP? Passenger and cargo revenue is recognized when the transportation service is provided. Passenger tickets net of discounts are recorded as current liabilities in the ‘sales in advance of carriage’ account until recognized as revenue. Yes, this would be handled similarly under U.S. GAAP. Amount 2013: 853 million euros 2012: 750 million euros Yes, transactions would be similar under U.S. GAAP. C2. Read the note for “provisions for liabilities and charges.” a. Do the beginning and ending balances of total liabilities and charges shown in the note for the fiscal year tie to the balance sheet? By how much has the total amount of the BA’s “provisions for liabilities and charges” increased or decreased during the fiscal year? Is the threshold for recognizing a liability associated with these items any different under IFRS than it is under U.S. GAAP? Explain. The balances do not match when you look at the note and balance sheet. It appears that the balance has increased. On the balance sheet there are three different types of provisions. Provisions for deferred tax for 721 and other provisions...
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...Work Plan for the Consideration of Incorporating International Financial Reporting Standards into the Financial Reporting System for U.S. Issuers A Comparison of U.S. GAAP and IFRS A Securities and Exchange Commission Staff Paper November 16, 2011 OFFICE OF THE CHIEF ACCOUNTANT UNITED STATES SECURITIES AND EXCHANGE COMMISSION This is a paper by the Staff of the U.S. Securities and Exchange Commission. The Commission has expressed no view regarding the analysis, findings, or conclusions contained herein. TABLE OF CONTENTS I. II. Introduction..........................................................................................................................1 Methodology ........................................................................................................................2 A. Scope of the Analysis...............................................................................................2 B. MoU and Other Joint Projects..................................................................................3 C. SEC Rules and Regulations .....................................................................................8 D. General Observations and Clarifications .................................................................8 Comparison of Requirements ............................................................................................11 A. Accounting Changes and Error Corrections...
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...the year ending December 31, 2010. These activities include all draws of the line of credit are to be due on demand, a draw of $60 million on July 15, 2010, another draw of $40 million on August 30, 2010, a payment of $50 million on September 30, 2010, and for Beverly to assume that the volume of transactions is considered to be large. Beverly had a disaster in one of its sale offices in the Gulf Coast Region. Hurricane William damaged the warehouse and Beverly had to rent temporary office space in Houston. Beverly filed an insurance claim and received $15 million from its insurance carrier. It decided to use those proceeds to fund its pension plan rather than rebuild its warehouse. Beverly must decide which cash flow statement treatment is appropriate. It must also discuss how IFRS apply to cash flow statement and how they compare to U.S. GAAP. While addressing the decision on where to put the borrowing and payment activity on the statement of cash flows, Beverly should refer to ASC 230-10-45-14 and ASC...
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...PwC Similarities and Differences A Comparison of IFRS, US GAAP and Indian GAAP* *connectedthinking November 2007 PricewaterhouseCoopers’ publications and tools PricewaterhouseCoopers has a range of tools and publications to help companies apply IFRS (see also the inside back cover). Illustrat ive Consolidated Fin ancial Statements • Corporate, 2007 • Banking, 2006 • Insurance, 2006 • Investment funds, 2006 • Investment property, 2006 Realistic sets of financial statements – for existing IFRS preparers in the above sectors – illustrating the required disclosure and presentation. Measurement checklist 200 6 Outlines the measurement bases required by all IFRSs published up to September 2006 Adopting IFRS – A step-by-step illu stratio n of t he transitio n t o IFRS Illustrates the steps involved in preparing the first IFRS financial statements. It takes into account the effect on IFRS 1 of the standards issued up to and including March 2004. IFRS for SMEs (proposals) – Pocket Guide 200 7 Provides a summary of the recognition and measurement requirements in the proposed ‘IFRS for Small and MediumSized Entities’ published by the International Accounting Standards Board in February 2007 IAS 39 – Achi eving hedge accounting in practice Covers in detail the practical issues in achieving hedge accounting under IAS 39. It provides answers to frequently asked questions and step-by-step illustrations of how to apply common hedging...
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